If you're trying to buy a home in Texas, you may in the end be foiled by something you might never have suspected- homeowner's insurance. Or, in this case, the inability to find it. It's a problem whose storm clouds have been brewing on the horizon for some time. Unfortunately, the response by Governor Rick Perry and the Texas Legislature has been to bury their heads in the sand and hope it goes away. It has not.
AUSTIN -- Some call it the Perfect Storm -- a confluence of events that merged into a financial crisis for the insurance industry and a politically charged catastrophe for Texas homeowners, threatening disaster for the state's economy.
Gale warnings went up late last year as insurance companies started rapidly raising homeowners rates, sometimes as much as 200 percent. The storm intensified last week when the state's second-largest insurer -- Farmers Insurance Group -- withdrew from the Texas homeowners market.
Now homeowners have to worry not just about whether they can afford insurance but whether they can buy it at all.
The ripple effect may slam the income of real estate agents, homebuilders and mortgage bankers as the sales of new and existing homes are blocked by the lack of insurance.
Gov. Rick Perry and Attorney General John Cornyn, both Republicans, blame the insurance industry for price gouging. Perry and his Democratic opponent, Tony Sanchez, are fighting over who is more a part of the problem or part of the solution.
Perry and Sanchez want to close the state law loophole that allowed the insurance industry to shift homeowners policies from state-regulated companies to unregulated firms known as Lloyds.
Perry wants to freeze premiums while regulators decide an appropriate rate. Sanchez wants rates rolled back during the rate review to the state's existing benchmark for regulated companies.
"The abuses that we are seeing need to be corrected by constant oversight," he said.
Gov. Ann Richards established the benchmark rate for regulated companies in 1991. It was intended to protect consumers while giving insurance companies the ability to raise or lower rates as their financial conditions changed.
Individual companies may vary their rates by 30 percent above or below the benchmark rate.
The current benchmark rate for Harris County for $100,000 coverage on a brick veneer house with $40,000 coverage on its contents is $658 a year under the full-coverage policy called an HO-B.
But because most policies are now sold by unregulated companies, the benchmark does not apply.
Solutions seem to be few and far between, but the recriminations are flying at breakneck speed. The Governor's race is a perfect example. Tony Sanchez accuses Governor Goodhair of being in the pocket of "Big Insurance" while turning a blind eye to skyrocketing homeowner's rates. Governor Goodhair counters by saying that Sanchez' own bank sells unregulated insurance using (GASP!) credit scoring. Of course, the obvious question here remains unasked- WHY is the insurance that Sanchez' bank supposedly sells unregulated? If there is a problem, shouldn't someone come up with a solution? Of course, that would require Governor Goodhair to come up with a plan, something he has proven singularly incapable of doing. The man wields a mean veto pen. Shooting down the ideas of others seems to be second-nature to Governor Goodhair, but coming up with an idea of his own appears to be beyond his capabilities.
To anyone outside of Texas, it may be difficult to comprehend why this is such an issue. Try buying a home here, and then we'll see what tune you're singing. The Governor and the Legislature have seen this problem coming for some time, and yet no plan or solution has been forthcoming. Because of their lethargy and inability/unwillingness to deal with the problem before it became a problem, thousands of Texans may well see their dream of owning a home delayed. Governor Goodhair has proven himself astoundingly inept when it comes to showing leadership in a crisis. In this case, one of Sanchez' campaign slogans seems oddly appropriate: "Rick Perry- We didn't elect him. We don't have to keep him."? Indeed....